Journal of Evolutionary Economics

, Volume 27, Issue 5, pp 1041–1070 | Cite as

Heterogeneity, spontaneous coordination and extreme events within large-scale and small-scale agent-based financial market models

  • Noemi Schmitt
  • Frank Westerhoff
Regular Article


We propose a novel agent-based financial market framework in which speculators usually follow their own individual technical and fundamental trading rules to determine their orders. However, there are also sunspot-initiated periods in which their trading behavior is correlated. We are able to convert our (very) simple large-scale agent-based model into a simple small-scale agent-based model and show that our framework is able to produce bubbles and crashes, excess volatility, fat-tailed return distributions, serially uncorrelated returns and volatility clustering. While lasting volatility outbursts occur if the mass of speculators switches to technical analysis, extreme price changes emerge if sunspots coordinate temporarily the behavior of speculators.


Financial markets Stylized facts Agent-based models Technical and fundamental analysis Heterogeneity and coordination Sunspots and extreme events 

JEL Classification

C63 D84 G15 


Compliance with Ethical Standards

This study was funded by ISCH COST Action IS1104: “The EU in the new complex geography of economic systems: models, tools, and policy evaluation”. The authors declare that they have no conflict of interest.


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Copyright information

© Springer-Verlag Berlin Heidelberg 2017

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of BambergBambergGermany

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